Annoyed by racial injustice? Where your bank can make a difference

Consumers can lobby for racial justice, and it’s as simple as opening an account at a community bank or credit union that supports communities that don’t receive services.

Netflix recently announced that it would transfer $ 100 million of its cash holdings to financial institutions that support black communities in the U.S.

Meanwhile, in the United States, there are more than 1,000 community development financial institutions, or CDFIs. These institutions specialize in underserved communities, and more than a third of their banks are run by minorities. An analysis found that over 40% of CDFI’s loans and investments are in majority and minority communities.

“With all the racial issues, now is the perfect time for people to open an account at a community development bank or credit union,” said John Holdsclaw, chairman of the Board of the Coalition of Community Development Financial Institutions.

The NerdWallet personal finance website has a list of CDFIs by state.

“These institutions provide equity in these low-income black and brown communities. They were created to be able to provide loans at reasonable prices and a place to build assets. It’s not about profit, it’s about creating access,” Holdsclaw said.

Historically, banks have not served communities of color: 14% of black households and 10% of Hispanics had no bank accounts in 2019, according to the Federal Reserve. For comparison, only 3% of white households do not have banking services.

Perversely, not having access to a bank can cost consumers more. This is because they often turn to alternative financial services to manage everyday banking needs, including cashing checks at retailers or using payday loans.

Both options are riddled with fees. According to NerdWallet, check cashing services can reduce consumers from 1% to 10% of the value of a check. Meanwhile, providers of payday loans can pay a fee that ranges from $ 10 to $ 30 for every $ 100 borrowed, according to the Office of Consumer Financial Protection.

Similarly, black and Hispanic business owners suffered during the coronavirus pandemic, and lost federal lifelines that could have kept their businesses afloat.

Amid the public health crisis, the number of working black business owners has dropped more than 40%, according to recent research from the Stanford Institute for Economic Policy and Research.

However, a survey found that only 1 in 10 Black or Latinx small business owners received the assistance they requested under the government stimulus package. The Responsible Loan Center also found that many black business owners were excluded from the Paycheck Protection Program, small business loans designed to keep employees on the payroll throughout the pandemic. The application deadline is August 8.

The unbanked and the unbanked were at a particular disadvantage.

“The first time PPP was launched, not all banks were doing it,” said Sheneya Wilson, CPA and founder of Fola Financial in New York. “Those that did require you to have an account with them before COVID-19.”

At Hope Credit Union, a CDFI with nearly 30 locations across the South, PPP numbers are much better. More than half of the paycheck protection loans issued there during the pandemic have been granted to business owners of color.

“We receive people into the banking system in a region that is one of the most bankd in the nation,” said Bill Bynum, CEO of Hope Credit Union. “We help them access a number of tools, from credit building products to down payment assistance for first-time homebuyers.”

The credit union also helps formerly incarcerated people access small savings and loan accounts by considering factors such as rent or cell phone payment records for those with a small or troubled credit history. African Americans are in prison five times more than whites, according to the NAACP.

You can live anywhere in the US and open a savings account with Hope Credit Union, Bynum said.

The Lower East Side Federal People’s Credit Union, before CDFI, helps immigrants by offering its savings and loan products to members who have an Individual Taxpayer Identification Number instead of a Social Security number.

“All of our products and services are designed to benefit our members of color and provide financial services to communities at risk where many people do not have or are banked,” said Maureen Genna, executive director of Federal People’s Credit for the Lower East Side Union. (To become a member, you must live or work in certain New York City neighborhoods or live anywhere in the city and earn less than $ 50,000.)

Overall, more than 17% of credit union members are black, compared to about 13% of bank customers, according to an analysis by the National Association of Credit Union. At YourMoneyFurther.com, you can find a credit union near where you live.

OneUnited Bank, a CDFI owned by Black, offers “second chance checks” for people who may have difficulty opening accounts elsewhere due to an imperfect bank history. Anyone can join the bank, which has offices in Los Angeles, Boston, and Miami.

The bank has also provided life lines to small businesses through PPP loans.

“The first PPP loan we processed was an Uber driver,” said Kevin Cohee, CEO of OneUnited. “The reason we did that was to point out that he is the smallest among us, where he could lose money, that he needs the most help.”

Finally, Ponce Bank, a CDFI based in Bronx, New York, has helped clients create credit. The bank recently partnered with Grain Technology to provide people with a line of credit using their existing debit card.

“These are revolving lines of credit for those with little or no credit,” said Frank Pérez, executive vice president and chief financial officer at Ponce Bank. “This is reported to the credit bureaus, so we are now helping people who are not receiving enough services.”

The bank also recently acquired Mortgage World Bankers in Queens, New York, which means it will soon be able to offer 30-year mortgages to its clients.

“With this acquisition, it’s another tool in our war chest to help low-income communities get the mortgage they’re looking for,” said Pérez.

Before moving your money from one institution to another, you should compare the rates between the two, said Graciela Aponte-Díaz, director of federal campaigns at the Center for Responsible Loans.

“There are now many checking accounts with monthly fees,” he said. “You want to be aware of them before you switch.”

You should also make sure that your bank is backed by the Federal Deposit Insurance Corporation, which insures your savings up to $ 250,000 per depositor per bank. Credit unions, meanwhile, are insured by the National Administration of Credit Cooperatives, also up to $ 250,000 per individual account.

Credit unions and CDFIs can also offer competitive rates on auto loans and mortgages, Aponte-Díaz said.

“See who offers you the best interest rate,” he said. “If the credit union and the big bank are offering the same thing, going with the credit union will mean that the interest you are paying will go to your income rather than to a large bank.”

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